The Chinese economy relies on manufacturing and mining for the largest share of its economic output. Coal mining, iron, steel and aluminum production, and textiles and garments manufacturing account for 49% of total economic output (employing 25% of the nation’s workforce). The services sector (for example, retail and tourism) contributes 39% of GDP (employing 31% of the workforce), while agriculture, which employs a massive 45% of the country’s workforce, accounts for just 12% of total GDP. Consequently, many international investors choose China company formation to set up export-orientated manufacturing industries.

China's spectacular economic growth is threatened by:

i) State control of certain sectors of the economy. In 2007 an estimated one third of the Chinese economy remains controlled by inefficient state enterprises, discouraging China company formation;

ii) Old, inefficient Chinese manufacturing plants, which are gradually being replaced in some regions by modern, foreign-invested facilities;

iii) An energy shortfall which disrupts industrial output;

iv) The tensions over neighboring Taiwan, which makes foreign investors planning China company formation nervous;

v) The spiraling costs of oil imports caused by record international crude prices. China must import 46% of its oil requirements to meet soaring demand from its expanding economy.

vi) Furthermore, some foreign investors considering China company formation are put off by the poor local protection of intellectual property rights (IPR).